Introduction
Big 5 Sporting Goods (BGFV) shares have rebounded from 52-week lows of $1.57 to $3.85 (at the time of this writing) due to expanding gross margins which management has driven by transitioning its business model to an "off-price" model by opportunistically purchasing discounted sportswear and related merchandise and selling these to customers.
Although we are slightly late to the party, we believe BGFV management needed to show at least a couple quarters of margin improvements to ensure that higher margins are sustainable on a go-forward basis and were not driven by one-time